North Queensland
Resources Supply
Chain Project
Steering Committee Report
December 2013
Introduction
The Mount Isa to Townsville corridor is the strategic link between the North West
Queensland Minerals Province and the processing and export port facilities in
Townsville and Abbot Point. It is an important economic link, supporting the export of
$15 billion worth of product per annum.
In April 2012, the Queensland Government was successful in securing funding for
infrastructure planning from the Australian Government Regional Infrastructure Fund
(RIF) for the North Queensland resources supply chain corridor between Mount Isa
and Townsville. This North Queensland Resources Supply Chain (NQRSC) Project
will build on the 50 year Freight Infrastructure Plan recently developed by the Mount
Isa-Townsville Economic Zone (MITEZ), with support from the Queensland
Government and Infrastructure Australia, which outlines a long-term, demand-driven
freight infrastructure plan for the region, encompassing road, rail and port, and
recommending efficiency improvements along the corridor.
The NQRSC Project aims to improve the efficiency and productivity of the supply
chain by better coordination amongst infrastructure owners, operators and current
and future users to manage the movement of freight along this economically
important corridor. The RIF funding has also been used to develop a comprehensive
demand model to enable the future prioritisation of infrastructure projects on the
corridor.
To provide oversight to the project the Deputy Premier, the Honourable Jeff Seeney
MP, formed a 13 person steering committee. The membership of the steering
committee reflects the full range of interests in the overall project and includes
representatives from MITEZ, a local mayor, the key freight players in the region
(including the mining industry, Queensland Rail and the Port of Townsville), the
Commonwealth and relevant Queensland Government departments.
In order to understand how to improve the efficiency and productivity of the supply
chain, the steering committee initiated a work program to consider future demand for
commodities from the region, determine the current performance, capacity, and
operations of the supply chain as a whole, and to understand the current constraints
on the system. In response to these issues the steering committee then looked at
different operating models to improve the productivity and efficiency, and provide
better transparency along the supply chain, including how a supply chain co-ordinator
might contribute to this outcome. This report from the steering committee is intended
to provide the Deputy Premier with a number of recommendations and advice in
support of improved efficiency and productivity along the North Queensland
Resources Supply Chain corridor in the future.
It is the Committee’s view that the corridor is “fit for purpose”, meeting the needs for
the current users, and has existing surplus capacity in both the rail and port systems.
The Committee however sees opportunities to further enhance the supply chain by
focusing on three broad areas of improvement. These are:
1. Improved long term strategic planning that can better identify infrastructure
upgrade requirements.
2. Improved day to day operations of the corridor through better co-ordination
amongst corridor operators and participants and;
3. Improved clarity and access arrangements for new, smaller entrants seeking
export solutions on the corridor.
Steve de Kruijff (Chair, NQRSC Steering Committee)
2
How was the work undertaken?
The NQRSC project focussed on three (3) key priorities:
1.
understanding demand
2.
determining true capacity along the corridor
3.
identifying optimal supply chain operation
In support of these priorities the steering committee settled on a refined scope for the
NQRSC project which included three (3) key pieces of work:
A comprehensive demand modelling framework to enable prioritisation of
projects, policy and investment decisions. The outputs of the demand model are
to be used to undertake further analysis of the Mt Isa – Townsville corridor and
will be fed into subsequent transport infrastructure forecasting and economic
models run by the Queensland Government.
Supply chain audit – a detailed assessment of the corridor’s performance,
capacity, operations, planning and execution of the freight task across the supply
chain to determine the true capacity of the NQRSC corridor from rail to port with
the view to understanding current constraints and determining infrastructure
development priorities.
Supply chain coordination analysis - considered options for greater efficiency
of operations along the corridor and options for greater transparency in decision
making.
The procurement process resulted in 3 separate consultants being appointed: GHD
to prepare the demand model; Orion Advisory to undertake the supply chain audit;
and Sinclair Knight Merz (SKM) for the supply chain coordination analysis.
NQRSC Project Key Findings
What does the supply chain look like?
The NQRSC is a unique multi-dimensional supply chain that transports a range of
commodities across the Townsville to Mount Isa regional economic zone. It is a high
value, low volume supply chain covering vast distances and featuring extreme
operating conditions and significant adverse weather events. In fact it is reasonable
to suggest that if the North West Minerals Province were to be discovered today the
infrastructure solution that exists on the Townsville to Mount Isa corridor would be
identified as uneconomic. As such the region is fortunate to have the existing
infrastructure in place to service the commodities that it does.
The corridor is predominantly used by a small number of large base metals
producers, each with their own specific logistics channels. These channels often are
underpinned by supply chain infrastructure that is tailored to the product or company
requirements and operating in relative equilibrium. For these operators the supply
chain is effectively ‘fit for purpose’. Any failures in the supply chain therefore exist
largely for smaller base metals operators looking to gain access to the corridor. In
most cases, commentary on system failures for these smaller operators reflected
their inability to under-write the usual commercial contracts with most companies
typically focusing their funds on key priorities that appeal to their investor base.
3
How does it operate?
Operating environment
The Demand Model has produced five volumetric outlook scenarios for the corridor,
with three primary scenarios (low, medium and high) based on current publicly
available Joint Ore Reserves Committee (JORC) information.
Freight volumes vary over the corridor, reaching highest levels at the Port (ultimately
affecting the whole corridor). From a base volume of 12 million tonnes per annum,
the future freight task could involve limited growth of 1-2 million tonnes per annum
over the next 20 years under a low growth scenario, or could result in an increase of
6-7 million tonnes per annum over this period under a high growth scenario,
The future freight task for the Mount Isa – Townsville corridor will be dependent upon
a number of considerations, most notably commodity demand and prices, exchange
rates and the commercial viability and competitiveness of mines (existing, new or
expanding), including cost of the freight task.
The above scenarios do not include the impact of inferred resources (i.e. JORC data
resulting from new drilling or exploration) or energy commodities (coal and shale oil)
which could result in a significant increase in corridor volume (Further scenarios have
been developed as part of the demand model that include demand increases for
these scenarios). If this were to eventuate, proponents of these projects would need
to factor in the costs of appropriate upgrades to the corridor in their economic
modelling as part of their project feasibility assessments.
As such, the infrastructure servicing the corridor is largely adequate to deal with the
forecast commodity growth in the longer term.
An assessment of the existing infrastructure has found that the road and rail corridor
west of Charters Towers has spare capacity and that, with continued maintenance, it
is fit for purpose, albeit, train speeds along the corridor will be restricted in some
places due to soil and climactic conditions. The Capacity Audit however, identifies
opportunities for improved operations and development of more efficient rail handling
infrastructure for that part of the corridor from Stuart (immediately south east of
Townsville), where the corridor interacts with the North Coast Line, to the Port of
Townsville.
A notable constraint on the corridor is train length. The system train length for the
Mount Isa corridor is 1000 m. The limitation of the rail infrastructure at the Port due to
constraints associated with handling long trains and limitations with customer sidings
and loops means that no 1000 m rail service currently enters the Port precinct. Rail
services to the Port are either operating at shorter lengths or are split up at Stuart to
enable shorter shunt transfer operations to the Port. This impacts rail capacity to the
Port.
Corridor capacity is further constrained by the convergence of the Mount Isa to
Townsville corridor with the North Coast Line at Stuart. Delays caused by
operational congestion in the Port rail area are a further challenge of the system.
The Port rail system has in fact been identified as the current major system capacity
constraint within the rail supply chain. This includes congestion from rail movements,
and the impacts from constraints from loading/unloading, due to unloading rates or
train length constraints. The system is at or near sustainable capacity with the
concurrent operation of local sugar, nickel ore and imported zinc concentrate trains,
on top of the Mount Isa Line traffics during peak operating periods.
4
Much of the rail infrastructure in the port rail system, that is privately owned, has
remained unchanged for many years and each customer has established its own
component supply chain operation to meet its specific needs. Without a step change
in volume throughput, each operation has continued to operate in equilibrium. If
enhancements could be undertaken to the track layout more capacity would be
created and congestion decreased.
Overall, the steering committee found that there are no chronic stand-alone
bottlenecks along the corridor. Rather, despite some operations approaching their
system capacity limits, most of the major supply chains on an individual basis are
operating in equilibrium. It is more when interface complexity in the system is
subjected to peak period stresses that system failures begin to occur and recovery
capability is reduced. Moreover the supply chain is considered fit for purpose for
larger, established players however the emergence of new, smaller players has
identified some constraints around access and supply chain solutions.
Competing interests
The NQRSC has a range of stakeholders including infrastructure providers, transport
operators, customers and Port of Townsville potential customers who are seeking to
maximise their return from operations on the corridor or facilitate new developments
and ventures in the region. Over time, the individual supply chain components have
worked to meet their individual goals and objectives. These operations have
responded to key drivers and are operated under the respective governance
arrangements that have evolved with the operations. However, the NQRSC is a
single corridor, and as such, decisions made by individual operators over time, tend
to impact the overall efficiency of the entire system. The “third party” access regime
administered by Queensland Rail and regulated by the Queensland Competition
Authority, negates opportunity for any one supply chain participant to exert influence
over the entire system; however evidence identified in the program of works suggests
restrictions in the first and last kilometres of the supply chain. Opportunity exists for a
more integrated whole of system, strategic planning framework that can alleviate
some of these pressures.
Different infrastructure operators
Each of the key infrastructure owners and operators along the corridor have planning
functions that operate independently, providing an environment for poor
communication and coordination that left unchecked, will result in capacity
constraints during peak periods brought about by a lack of full supply chain strategic
planning. The steering committee has identified an opportunity for improved coordination through greater levels of shared strategic planning between QR and
operators and the Port of Townsville, as well as improved infrastructure facilitation
and development options.
In addition, the separation of the rail functions in Queensland in 2010 into two
separate entities resulted in Townsville below rail track infrastructure remaining with
Queensland Rail (QR) and the above rail operations being transferred to the above
rail operator Aurizon. Despite this split, the custodian and control of the Port rail
infrastructure after the separation was allocated to Aurizon despite ownership
residing with QR. This has created some operational issues.
The return of control of the Port rail infrastructure from Aurizon to QR should assist
with a number of these issues.
5
Is it fit for purpose?
In short, the steering committee found there are multiple commodities that are
transported within the NQRSC system across different modes and with different
equipment configurations that are based on ageing infrastructure or product
requirements. As such, the NQRSC is not one supply chain, but an amalgamation of
many sub-component supply chains. These sub-component supply chains are either
product or infrastructure driven and may overlap each other or remain distinct and
independent. Most of the commodities have product or company specific logistics
channels. These channels often are underpinned by supply chain infrastructure that
is tailored to the product or company requirements. These sub-component supply
chains will often operate in equilibrium. However the operation of the NQRSC
system as a whole is sub-optimal. Moreover the supply chain is considered fit for
purpose for larger, established players however the emergence of new, smaller
players has identified some constraints around access and supply chain solutions.
Overall the NQRSC System has low volumes, struggling to gain the economies of
scale required to maximise efficiency largely due to sparse volumes and the length of
the corridor. So whilst the supply chain is essentially fit for purpose for the larger
operators, operational and organisational issues appears to restrict its efficiency and
functionality.
Action Plan
Can it be improved?
The steering committee has identified a number of opportunities along the corridor for
improved operations. Broadly, these opportunities can be grouped into three areas:
1. Improved long term strategic planning that can better identify infrastructure
upgrade requirements.
2. Improved day to day operations of the corridor through better co-ordination
amongst corridor operators and participants and;
3. Improved clarity and access arrangements for new, smaller entrants seeking
export solutions on the corridor.
1. Improved long term strategic planning that can better identify infrastructure
upgrade requirements.
Opportunities for improved co-ordination along the corridor exist through improved
strategic planning between rail infrastructure developers and operators and the Port
of Townsville, supported by significant stakeholders and users of the corridor. The
NQRSC has developed a comprehensive demand model for future commodities that
will be using the system. This model should form the basis of future planning on the
corridor. Additionally, there are conflicts in the system that can only be resolved
through combined planning of all infrastructure providers.
6
STRATEGY ONE: Improve Strategic Planning for the NQRSC
1.0
POSSIBLE INITIATIVES AND ACTIONS
1.1
The outputs of the NQRSC demand model are used to
undertake further analysis of the Mt Isa – Townsville
corridor and be incorporated into the Infrastructure
Future Analysis Platform (IFAP) run by the
Queensland Government.
DTMR / DSDIP
1.2
That the NQRSC Demand Model is made available to
QR and the Port of Townsville for ongoing planning
activities.
DSDIP
1.3
That funding is allocated to ensure that the NQRSC
Demand Model is updated on an annual basis with
possible future expansion to capture all trades through
Townsville Port by berth.
DSDIP / DTMR
AGENCY
STRATEGY TWO: Address Identified Infrastructure Bottlenecks
2.0
POSSIBLE INITIATIVES AND ACTIONS
AGENCY
2.1
QR and the Port of Townsville investigate the feasibility
of operating 1000 m train services to the Port. This
should include upgrades to customer owned sidings at
the Port, the development of holding/staging sidings
prior to entry to the Port and at other strategic locations
on the network.
QR / PoTL
2.2
An assessment is undertaken of the conflicts on the
Jetty Branch (Townsville Port) and systems to
streamline conflicts in peak periods including
optimisation of the track layout to allow more operations
to occur in parallel.
QR/PoTL
2.3
The Port of Townsville investigates opportunities to
develop a multi user berth or berths including market
interest in the development and operation of Berths 4
and 12 as multi-user berths.
PoTL
2.4
Rail infrastructure and services within the Port precinct
and adjacent rail marshalling areas be subject to a
detailed planning review by QR and PoTL to address
limitations, maximise operational flexibility with landside
logistics and berth connectivity.
QR/PoTL
7
2. Improved day to day operations of the corridor through better co-ordination
amongst corridor operators
The NQRSC believes further capacity can be achieved in the system through better
network planning and a better integrated approach to day of operations activities.
This includes rail and road movements as well as berthing operations. There is room
for further capacity gains, particularly between Stuart and the Port of Townsville
through improving day to day operational activities and longer term network planning
that will delay the need for expensive infrastructure upgrades. This is the most
immediate requirement to improve capacity options on the NQRSC and will require
commitment from all entities involved in the supply chain to participate and align
current operational practices.
STRATEGY THREE: Investigate Options for improved berthing operations.
3.0
POSSIBLE INITIATIVES AND ACTIONS
AGENCY
3.1
The Port of Townsville manage and implement where
possible, a system of control and incentive for Berth
Operators to maximise efficiencies in cargo handling.
PoTL
3.2
The Port of Townsville investigates strategies to
optimise Berth utilisation and tonnage through berth
and cargo alignment planning and scheduling including
an assessment to identify options to facilitate upgraded
cargo handling equipment on strategic berths.
PoTL
STRATEGY FOUR: Improve Day of Operations Oversight on the NQRSC
4.0
POSSIBLE INITIATIVES AND ACTIONS
AGENCY
4.1
Consider the co-location of day of operations control
staff (Port of Townsville ship / berth / pilot control, MSQ
VTS and QR train control)
DTMR / MSQ / QR / PoTL
4.2
PoTL, QR, and port berth managers (as well as
stevedores and ships’ agents) to investigate options and
costs for providing visibility of landside cargo availability
to load and cargo deliveries scheduled to enhance ship
berthing decisions.
PoTL / QR to lead
4.3
Port of Townsville and QR to investigate options and
costs to provide full train control visibility for train
movements within Port of Townsville.
PoTL / QR
4.4
Review NQRSC maintenance planning and alignment
and consider options for web based maintenance
planning software.
DTMR / QR / PoTL
8
STRATEGY FIVE: Enhance Long Term Network Planning.
5.0
POSSIBLE INITIATIVES AND ACTIONS
AGENCY
5.1
Establish a framework for longer term network
development and planning including KPI performance
reporting; cause of disruption and plan departure
analysis; and reporting on maintenance activities,
expenditure plans and upgrade scheduling.
To be determined
5.2
Undertake a Proof of Concept study to evaluate the
benefits and costs of developing a
comprehensive supply chain model for NQRSC.
To be determined
5.3
Compile or update a schedule of all rail assets in the
port which includes asset owner, land arrangements,
description, capacity / rate, purpose, utilisation.
QR / PoTL
Assess Port of Townsville for all rail assets to be
acquired by Port of Townsville or QR and centrally
managed including all costs associated with
management and operations of the asset.
5.4
Townsville Port, QR and any others affected to compile
a listing of legacy agreements, assets, arrangements
and common practices that impede efficiency, utilisation
or development. Develop prioritised action plan for each
including desired outcome, changes required.
To be determined
3. Improved clarity and access arrangements for new, smaller entrants seeking
export solutions on the corridor.
The NQRSC Committee, through the course of its deliberations with stakeholders
has been regularly made aware of the uncertainty and difficulty smaller entrants have
faced in accessing export solutions on the supply chain. In some cases, this is
caused by confusion over the most appropriate course of action to take, and which
authorities to speak to, to receive advice on how a whole supply chain solution can
be reached. Additionally, smaller users have regularly raised the costs associated
with accessing the supply chain, particularly where mis-matched investment horizons
may make a project uneconomic if one project was required meet the costs of
significant infrastructure upgrades. Given the future commodity make up of the
corridor, there is a need to consider options for facilitating bundled solutions for
multiple parties who may be interested in pooling resources to fund significant
infrastructure upgrades in the future.
9
STRATEGY SIX: Supporting New Entrants.
6.0
POSSIBLE INITIATIVES AND ACTIONS
AGENCY
6.1
Develop an access map for new users on the corridor to
clarify existing logistical arrangements and how export
solutions can be developed.
DSDIP
6.2
Investigate opportunities for bundled and shared
logistics solutions to facilitate streamlined access
options for new Port customers requiring integrated
supply chain solutions.
DSDIP / DTMR
6.3
The Port of Townsville investigates opportunities to
develop a multi user berth or berths including market
interest in the development and operation of Berths 4
and 12 as a multi-user berths.
PoTL
10
Implementation
The NQRSC Committee acknowledges that, when taken in totality, the
recommendations outlined represent a significant change to the way the NQRSC
currently operates. One of the key elements of the Committee’s Terms of Reference
was to consider whether a ‘Supply Chain Co-ordinator’ was required on this corridor
and what form it may take.
Through its deliberations, the Committee’s findings are that, while a Co-ordinator
overseeing individual commodity movements is not possible, a better co-ordinated
approach to whole of system operations and planning, is warranted. As outlined in
the recommendations above, a co-ordinated approach to implementing these
recommendations is required to ensure that effective changes are implemented
across the range of stakeholders involved in the NQRSC
It is recommended that the Deputy Premier consider the appointment of an
independent Co-ordinator with appropriate ministerial oversight, to be supported by
Queensland Rail, Port of Townsville Limited, Supply Chain stakeholders and the
Queensland Government to oversee the implementation of the NQRSC
recommendations.
The NQRSC Committee has sought the advice of its consultants in how this Coordinator may be established. There are a number of options available to the
Government to consider. The Committee has elected not to provide a
recommendation in how this Co-ordinator may be established or structured, however
the Committee has made all of its consultant studies available to the Department of
State Development, Infrastructure and Planning to provide advice to you on your
response to this report.
11